Balancing Risk and Speed in the New Era of Digital Lending

Jim Marous (00:10):

Welcome to our special eight-part series of the Banking Transformed Podcast recorded at MeridianLink LIVE in Nashville, Tennessee. I'm your host, Jim Marous. During this series of episodes, we dive deep into the world of digital transformation in the financial services industry.

Jim Marous (00:26):

We speak with executives from a diverse range of financial institutions, each of whom has embarked on a unique digital transformation journey to become more future ready and responsive to the changing needs of their customers.

Jim Marous (00:39):

We explore the strategies, challenges, and lessons learned by these forward-thinking organizations as they navigate the complex landscape of digital transformation.

Jim Marous (00:50):

Whether you're a financial services professional, a fintech entrepreneur, or simply interested in the future of banking, this series provides you with valuable insights and inspiration as we explore the cutting edge of digital transformation in the banking industry. We hope you enjoyed these candid conversations with organizations of all sizes.

Jim Marous (01:11):

Hi, this is Jim Marous, on the Banking Transformed Podcast, reporting directly today from MeridianLink LIVE at the Gaylord Hotel in Nashville. We're over 1,700 bankers are here, learning more about digital transformation process, learning from MeridianLink, learning from a lot of their partners, and learning from each other as people get together and share their stories.

Janel Hartin (01:34):

So, today I'm with Janel Hartin from Bangor Savings Bank with me. Janel, before we start, tell me a little bit about your background, your career, and then tell me a little bit about Bangor Savings Bank.

Janel Hartin (01:45):

Sure. I've been in banking 25 years. Actually, started as a teller and found a passion for lending. And so, when I had the opportunity to move into more of a lending role took that worked my way to a branch manager and then shifted completely to teach lending to other bankers. So, I spent about 10 years as a lending trainer and then I was kind of poached over.

Jim Marous (02:12):

About doing adjudication or what do you mean by lending trainer? What is that exactly?

Janel Hartin (02:17):

So, when we bringing in new lenders at the bank or promoting internally. I had the opportunity to teach them the systems, kind of go over the basic Cs of credit, sales acumen so that they could learn how to present and solve needs for our customers.

Jim Marous (02:35):

And tell me a little bit about Bangor Savings Bank.

Janel Hartin (02:38):

Bangor Savings Bank was established in 1852. We have been around a bit. We are a community bank. Started as a savings and loan company and have maintained that style of banking since 1852.

Janel Hartin (02:53):

We are about a $7 billion bank with 68 branches in Maine and New Hampshire, but we do lending where our snowbirds are. So, we lend all through New England and then the Carolinas and Florida as well.

Jim Marous (03:08):

The East Coast probably. I live on the East Coast in as being a snowbird and I'm against the grain because I'm from Ohio, so we're supposed to be on the West Coast, but we got on the East Coast.

Janel Hartin (03:18):

We'll keep you.

Jim Marous (03:19):

So, a little bit about what you do in the lending field right now with the economic uncertainty out there, there's a lot of things going on in lending field. Number one, the generation of new loans has slowed down, but the delinquencies have gone up.

Jim Marous (03:32):

So, what have you seen in your organization? How are you doing on the acquisition of new loans, but also on the delinquency rate in how your loans are performing?

Janel Hartin (03:41):

So, it is a fine balance between continuing to acquire new loans and maintain that risk tolerance that we have. We want to lend solidly and meet the needs of our customers, but also not open the bank to extreme losses in our consumer portfolio.

Janel Hartin (04:02):

We've just added credit cards to … we were doing credit cards with a vendor, but we've taken it in-house now. And so, that's been a big push, so new. But also finding that balance between our risk management partners who say tolerance and our need to continue to offer good loans and credit cards to our customers.

Jim Marous (04:28):

Would you consider Bangor Savings Bank to be more of a lending organization or deposit generation? I mean, and you have to do both because they have to be equal somewhere along there. But the reality is a lot of organizations are known as the best neighborhood lender. Some are being maybe the best new account acquisition customer.

Janel Hartin (04:45):

I think that we are of course the fine balance, but we are a deposit loan company. Our tenure was, we were founded to provide housing, to provide loans for mortgages. So, finding that balance between the two. We are heavy depositor, and the lending has been more of a, “Well, we have a need, we have a customer who has a need, let's do that loan as well.”

Jim Marous (05:10):

So, you've been at your organization for quite a few years?

Janel Hartin (05:13):

I have 18, yeah.

Jim Marous (05:14):

Over the last five years, what has been the biggest difference in the way loans are done, the way customers are wanting to have loans done it?

Janel Hartin (05:26):

It's a hundred percent the digital experience. Over the last three years really shifting from a very paper-based process, from a handwritten application to now we're able to do it digitally, underwrite it all very, very quickly and then close it digitally utilizing a DocuSign.

Jim Marous (05:47):

You can go from the beginning to the end entire without having to come in the branch.

Janel Hartin (05:51):

You can.

Jim Marous (05:52):

And that's all in the last, how long has it?

Janel Hartin (05:54):

Two years. Really.

Jim Marous (05:56):

So, two years. So, your partnership with MeridianLink has really been with a North Star focus saying, “As far as the front end of the process, we got to get it in and out of the door as quickly as possible with the least amount of duplication of efforts and friction that is possible. So, that the consumer wants it this way, we're going to do it.”

Jim Marous (06:17):

And now did you take that digital application, digital process then into the branches to be able to do it the same way to be that they would benefit from what you did from a digital platform basis?

Janel Hartin (06:29):

We really did. In order to take that data quickly, e-sign right there closed, whether they're still in the branch or they've gone home, and we are able to email the documentation, fund it, and post it to their account all within an hour.

Jim Marous (06:45):

How crazy is that when you think about that? It used to be you build the branch platform to do whatever it may be, new account acquisition loans, whatever else, and then move it to online which before mobile.

Jim Marous (06:56):

Now we're taking what we can do mobile-y and say, “Now we want to bring that,” even if it means we're giving tablets to employees to say we want to bring that process to the branch.

Jim Marous (07:07):

So, in this process, you're collecting data. You're collecting information that now digitally is easier than picking up on paper back in the old days. How does that change the risk measure, but more importantly, how's that change the way you work with customers that do have a delinquency?

Jim Marous (07:28):

Because I've seen more and more organizations really taking that as a customer experience opportunity. A wellness journey opportunity and the people that used to be collectors are now customer service agents and truly living that mode using data available to help them along their journey of wellness.

Janel Hartin (07:48):

So, that data collection, we have a business intelligence team that is collecting data from all of our LOSs, pulling it from our core system, and then being able to kind of hone in where we have a need even right to a customer level, to be able to address that education piece that we're here to help you help work through this so that we can get you back on your feet or get you moving forward.

Janel Hartin (08:16):

Our collections team, or our special assets team is fabulous at being able to work with a customer where they-

Jim Marous (08:20):

Our special assets. I like that.

Janel Hartin (08:22):

They are very special.

Jim Marous (08:24):

Height challenge, I'm not short. I like that. That's good.

Janel Hartin (08:29):

So, they work with our customers to help get them back on their feet, get on track. And that has maintained an ability to keep our delinquency rate a little lower and allow us to help that customer where they're at.

Janel Hartin (08:44):

Couple that with the education piece we spend a lot of financial education for our frontline to really helping them to understand their own financial wellness and be able to parlay that with our customers.

Jim Marous (08:58):

That's interesting, we haven't had that come up on a show before that basically you try to provide the same tools to your employees you do for your customers. Because they have the same real-life problems and the last thing they want is so the real life problems to be with the organization they work for, that's fear.

Janel Hartin (09:12):

That's huge.

Jim Marous (09:15):

And so, when you're working with this and making it all come together, and you recently are relatively recent as a MeridianLink customer as the partner that basically is bringing this brand-new, seamless loan process to the table.

Jim Marous (09:30):

How did you select MeridianLink? How do you select any partner? Because there's many partners that play in your loan side, there's many partners that your organization is doing in a composable solution basis. So, how do you pick that?

Janel Hartin (09:43):

Well, we did spend a lot of time researching. We were with CRIF prior to, so that made Meridian really dig in and find what they can do and how they can do it. Compared to some of the other vendors that were out there offering similar loan origination software.

Janel Hartin (10:02):

Meridian and their digital where they were going seemed to in line with where we need to go as a bank and order to, again, we're in Maine and New Hampshire, but we want to help our customers no matter where they travel to, so that has to be digital. I mean, we don't have a branch in the south, but we have customers there.

Jim Marous (10:23):

So, overall, would you consider yourself a digital bank from the standpoint of where your vision and perspective your culture is right now or it's just starting now. Where's that overall?

Jim Marous (10:34):

From your perspective because you've been there for a while, so you've seen all these changes, but sometimes it's hard for organizations to let go of legacy processes, systems, especially in the lending side. But in the overall organization, is a customer going to come to you as a digital organization?

Janel Hartin (10:50):

We hope they will but balance that with, we still want to be where our customers are. We're still opening branches in pockets of the state that we don't have a presence. We opened in our mid-coast just recently. So, added our 68th branch across Maine and New Hampshire.

Janel Hartin (11:09):

So, we still want to be where our customer is and then also be able to meet them where they want to be digitally on a mobile device that they could start and finish that process, if that's the way they choose to do lending.

Jim Marous (11:23):

So, we keep on talking about using mobile devices to start and finish the process. How long does this take?

Janel Hartin (11:28):

Well, for a personal loan, I mean, they can enter within minutes, even less.

Jim Marous (11:33):

Is that for an existing customer?

Janel Hartin (11:35):

An existing customer.

Jim Marous (11:36):

I'm about, a brand-new customer comes in. Because I know it's a little different when you don't have information on them.

Janel Hartin (11:40):

Right. I would say in less than five minutes they can submit an application.

Jim Marous (11:44):

So, without — I come into your branch, it takes five minutes or less.

Janel Hartin (11:49):

Within five minutes, yeah. Submit your application.

Jim Marous (11:53):

So, that's a relatively recent journey and I know MeridianLink has taken that same journey, maybe just a little bit ahead of you to be able to do that because that takes not only the ability to think about how do we do it digitally, but you can't do that front screen until you get what's behind the screen, the back office.

Jim Marous (12:12):

How do you communicate that process to your employees? Because a lot of their jobs depended on honestly, a more manual process. How do you communicate that digital transformation without making them feel at risk?

Janel Hartin (12:26):

So, that behind the same process is really about the communication piece of an app is in, it's been assigned. If the lender needs to be involved, they can get that information pretty quickly. Meridian's automation for automated actions, their communication tips and set up is fabulous.

Janel Hartin (12:48):

Because it lets me automate A files in, it's in this status, send a notice to, send it to Jim so Jim can reach out to that customer right away if I need them to. And if I don't, it's about collecting enough information that I can fully underwrite it without having to go back to my customer for additional information, which is nice.

Jim Marous (13:09):

So, you're again, with risk in mind all the time, with avoiding delinquencies, your focus is not on cost reduction as much as it is on experience enhancement and that's not always the case.

Jim Marous (13:25):

In the history of banking, you've been there for a while, we introduced ATMs, we introduced online banking, we introduced mobile banking, we introduced everything out there in order to cut costs and make it so there'd be fewer customers in a more expensive platform.

Jim Marous (13:38):

The reality is we just increased transactions. We didn't really do that. But to put the customer first and say the rest will take care of itself, growth, and everything else. Have you seen growth as an organization?

Janel Hartin (13:52):

Oh, yes, for sure. Explosive growth in the last 15 to 20 years. And I do attribute a lot of the digital services, meeting the younger customer, giving them the ability to connect with us. We are also a bank that is very connected in our communities.

Janel Hartin (14:11):

They give us 32 hours, paid each employee to do volunteer work within our communities. And so, having that connection in our towns and our cities where we live and be able to help our community-

Jim Marous (14:25):

You're doing banking the old-fashioned way with a lot of modern tools. And that's difficult because you’re a name, you have a very major bank in that area that was acquired several years ago now but they were known for the dog business. Because the pencils, the pens, the flags, the parades, all these other things.

Jim Marous (14:45):

And one question I always ask them, and I asked it honestly is, “How do you transfer that feeling to the digital experience? How do you deal with dog biscuits and pens and things like that, all those engagement tools. How do you do it?” Because you obviously have the same challenges, the same market, the same people.

Janel Hartin (15:06):

We do. It's finding that way to still be a big bank and maintain a small community but be small enough to still be big to meet those big needs.

Janel Hartin (15:16):

I think our marketing team is fabulous. That is speaking to our customer base, having it not saying enter name and that it's more conversational and keeps that connection and keeping our branches involved. I mean, those are the people that they know and that they want to continue to work with.

Jim Marous (15:39):

So, it's interesting that it's the communications process. You're a trainer, so that's something near and dear to your heart. But to be able to not only talk but to listen to the employees, listen to the members, the consumers, the customers and to be able to build a platform that makes it so that can grow.

Jim Marous (15:58):

As you look in the future, you've done a lot of things. You've accomplished a lot of goals that most people could only dream of, namely the amount of time it takes to open a new loan. But given that, what's the future? What do you see as what you need to do next? What does your organization have to do better?

Janel Hartin (16:16):

Well, I think we need to continue doing what we're doing, continue that connection, continue that community and then continue our growth in cross-sell and continuing finding the ways that we need to meet our customer where they are.

Janel Hartin (16:32):

They have additional needs, I need to be able to have a system that's going to say, and I can also see that you need to refinance or should refinance or that you could consolidate this and be at a more favorable rate than where you are. So, we need to continue to look for the solutions that are going to help our customers. Because things are expensive now, things get tough. And so, if I can help them.

Jim Marous (16:56):

So, MeridianLink has really pushing. We've been doing some research on their behalf around onboarding the loan customer. It's harder to onboard a loan customer and they come in digitally because you're not having that face to face. If I start to try to cross sell you, it's very infrequently you're going to get up from the desk and just leave right in the middle of it.

Jim Marous (17:13):

But you can do that with a digital device. You can go, “Thank you very much, but and I'm gone." And you hang up. How are you working to build an onboarding process or extended engagement? Because in a loan I get it and I can forget it for 24, 36, 30 years. How do you build that ongoing engagement?

Janel Hartin (17:40):

I think there's the challenge for sure. We were a indirect blender for years, a very big indirect lender. But we found that we didn't have the customer relationship because we got a car loan, and they were done. They can pay that from-

Jim Marous (17:53):

Never walked into a branch, when coming to the branch was part of the process.

Janel Hartin (17:57):

And so, they could set it up and pay it and they never show up in the door. We moved out of the indirect business because we wanted to focus more on that customer and that community connection with them. So, it is the challenge for sure.

Janel Hartin (18:12):

It's the reach out, it's the follow up, it's utilizing our — we've built our own CRM so that we can really connect and have that contact from a branch, from their local individuals with our customers so that we have the opportunity to build out a deposit relationship that follows up that single loan.

Jim Marous (18:33):

So, what keeps you excited about what's going to happen? I mean, what's going on now? Because you're obviously at the cutting edge of what MeridianLink offers and that's all good. You're pushing them, you work with them to build better and stronger products, but you also have to have the culture internally for your organization to be able to do this, what do you see down the road? What do you see exciting?

Janel Hartin (18:54):

For me, I think it's that continuing to meet our younger market and it's a lot of our employees as well. I look around, I'm like, "Oh, the people I've worked with for years are all retiring, when am I going to retire?"

Jim Marous (19:07):

I've been asking that for 15 years. Yes.

Janel Hartin (19:10):

But meeting that newer customer base and I think the financial growth, that education piece of course near and dear in my heart, but helps them to be able to grow with us. So, that's kind of where I get excited about building that relationship and helping them too.

Janel Hartin (19:29):

Today, it's just a credit card or a small loan but tomorrow, hopefully they can be able to do a mortgage when that change is hopefully, so that they can continue to grow in their needs and that we can help support them.

Jim Marous (19:45):

Thank you very much for being on the show.

Janel Hartin (19:46):

Thank you too.

Jim Marous (19:47):

We really appreciate your insight and your perspective because as a trainer of the loan division, you got to get on the inside of not only teaching people but having them listen, but you also listening back to say, "What's not being understood?"

Jim Marous (20:01):

And as the marketplace continues to evolve so quickly, you also have to teach them a little bit about what the consumer expects, what the customer expects on the line. And I think it's interesting how your organization really is mixed the legacy of the organization with the modernization of technology that's available and made it in such a way that obviously it's working because you're growing and there's a lot of organizations that have the tools that aren't growing. So, it's a juggling act sometimes.

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Janel Hartin (20:33):

Yep. For sure.

Jim Marous (20:34):

Thank you so much.

Janel Hartin (20:35):

Thank you.

Jim Marous (20:35):

I appreciate it. Thanks for listening to Banking Transformed, the top podcast in retail banking and the winner of three international awards for podcast excellence. We appreciate the support we've received from MeridianLink in making this eight-part series of episodes a success.

Jim Marous (20:53):

This has been a production of Evergreen Podcasts. A special thank you to our senior producer, Leah Haslage, director Dave Douglas, audio engineer Chris Fafalios and video producer Will Pritts. Thanks for joining us and until next time, keep innovating and transforming.

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